Mid-market credit rating downgrades outpace upgrades
Middle-market corporate credit rating downgrades outpaced upgrades by 2.4 to one for the year-to-date through 7 March 2025, according to a new Morningstar DBRS report.
During the same period last year, credit rating downgrades outpaced upgrades by 2.6 to one, the ratings agency said. On a trailing 12-month basis, the ratio of downgrades to upgrades is tracking slightly higher at 2.45 times compared with 2.4 times at the end of 2024.
In a new credit report, Morningstar DBRS noted that issuers with credit ratings lower than B (low) accounted for 19 per cent of its total rated portfolio, up from 10 per cent a year ago. Meanwhile, 2.4 per cent of the portfolio is rated as D (default), compared with 0.6 per cent a year ago.
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The ratings agency noted that although financial performance in 2024 for its active rated issuers indicated a nascent improvement in margin conditions relative to 2023, credit metric trends remained soft across the B (low) through C credit rating categories.
As a result, Morningstar DBRS has predicted that the recent rise in global economic uncertainty may begin to impede the recovery of the private credit sector.
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The report also warned that Trump’s tariffs and their potential impact on credit quality, inflation, and interest rates, as well as on the overall global economy, are among the largest downside risks to its credit ratings.
“Due to the everchanging dates on the implementation of tariffs, there is considerable uncertainty on what the future course of action looks like,” said the report.
“This uncertainty is a negative overall for economic, business, and market confidence.”
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